Last-minute concerns hound TRAIN bill

December 08, 2017

Last-minute concerns over the final outcome of the Tax Reform for Acceleration and Inclusion (TRAIN) continue to mount even as the bicameral conference committee said it is 90 percent done with its effort to harmonize the disagreeing provisions of the Senate and the House versions of the measure.

Sen. Sonny Angara, chairman of the Senate ways and means committee, said among those that remain unsolved are the proposed tax on coal and cosmetic products.

But one important feature of the measure that the bicameral conference committee had agreed on is something that ordinary workers would be happy about.

Higher cap

Members of the committee agreed on to increase the tax exemption cap of 13th month pay and other bonuses to P90,000.

Under current law or Republic Act (RA) 10653, the 13th month pay and other benefits, including productivity incentives and Christmas bonuses, are exempted from tax if they do not exceed P82,000.

Before RA 10653 was signed into law in 2015, only bonuses not exceeding P30,000 were tax-exempt.

The Senate version of the TRAIN retained the P82,000 tax-free cap while the approved version of the House of Representatives raised it to P100,000.

As compromise, members of the bicam, who are tasked to reconcile the differences of the two versions, have agreed to raise the tax-exempt ceiling to P90,000 effective starting 2018.

Bicam members have also agreed to exempt P250,000 annual taxable income of all individual income taxpayers.

The House contingent said they would not allow the Senate “insertions” as they maintained that all tax measures must emanate from the House of Representatives.

The House version did not impose tax on coal and cosmetics procedures and surgeries.

Angara said congressmen insisted that higher tax rates for imported coal, as well as coal sourced from Semirara, will eventually affect power rates, as the country is heavily relying on coal-fired power plants.

The Senate approved a 3,000-percent increase in coal taxes to be collected in three tranches until 2020, which means the current P10 excise tax will be raised to P100 in 2018, P200 in 2019 and P300 by 2010.

The Senate also adopted a 10-percent excise tax on cosmetic procedures for aesthetic purposes.

Senators also voted to double excise taxes on minerals and mineral products and quarry resources that proponents said was intended to promote “responsible mining and environmental protection.”

Coal tax

Over at the House of Representatives, Speaker Pantaleon Alvarez said the chamber will not allow the inclusion of the coal tax in the TRAIN bill as it would surely increase the price of electricity.

“Let us look at this objectively from the point of view of the consumers. If you impose additional taxes on coal-powered plants, the industry players may not complain because they’ll just pass it on to consumers,” he told radio dzRH.

The Senate approved a 3,000-percent increase in coal taxes to be collected in three tranches until 2020, which means the current P10 excise tax will be raised to P100 in 2018, P200 in 2019 and P300 by 2020.

Alvarez said the Senate’s insertion of the tax coal tax in the TRAIN “runs counter to the constitutional mandate that all revenue measures must originate exclusively from the House of Representatives.”

He said it is clearly spelled out in the Constitution that tax measures should emanate from the House and the Senate ‘may (only) propose amendments or concur (with).”

“They (senators) can propose amendments if we will allow it,” said Alvarez, noting that aside from the expected hike in electricity rates, the coal tax would also hinder the growth of the country’s manufacturing sector.

In a two-page position paper to the House committee on appropriations chaired by Rep. Karlo Nograles (PDP-Laban, Davao City), the consumer group Alyansa ng mga Grupong Haligi ng Agham at Teknolohiya para sa Mamamayan, Inc. (AGHAM) also opposed the provision, saying this would the price of electricity “affects all persons in every household and every business.”

“Aside from being a basic necessity, affordable electricity is an important key to national development, economic growth and social progress. Additionally, all the members of AGHAM are consumers of electricity and will be directly affected financially by the passage of Senate Bill No. 1592 and House Bill No. 5636,” said AGHAM which was represented by former Rep. Angelo Palmones in the 16th Congress.

AGHAM said proposal imposing a nearly 3,000 percent hike on coal in three tranches “is overtly excessive and appears to be imposed as an environmental measure to prevent coal from being used as a fossil fuel by generating, manufacturing, and other large plants that require efficient and stable source of heat to produce an end-product.”

“In order to be a valid environmental measure, it should not be grossly discriminatory and excessive in nature. Otherwise, while we also support the reduction of the effects of greenhouse gases to alleviate climate change, the drastic increase in the excise tax on coal will gravely affect consumers – both industrial and manufacturing industries, whose competitiveness in the global market may be curtailed, as well as end-users who will ultimately shoulder this tax measure’s impact of increased prices for basic commodities – possibly even worse than the benefits our nation stands to gain by the proposed tax measure,” it said.

Auto tax

Ramon Lopez, secretary of the Department of Trade and Industry (DTI) supports a lower increase in the excise tax on motor vehicles to cushion the impact on models entered under the Comprehensive Automotive Resurgence Strategy (CARS).

Lopez said a lower excise tax should apply to vehicles worth P1 million and below but is particularly important for CARS models since these are locally-manufactured.

A higher volume of sales for these vehicles would mean more assembly that would translate to jobs and economic activity for other industries like parts manufacturing.

The House version slaps a 3 percent tax on vehicles with a net manufacturer’s selling price or importer’s price of P600,000 and below on the first year and 4 percent on the second.

The Senate version, however slaps 4 percent on the first year.

Under the House version, vehicles worth P600,000 to P1.1 million will be taxed P18,000 plus 30 percent in excess of the value of the P600,000 while in the Senate version, vehicles over P600,000 to P1.1 million will pay P24,000 plus 35 percent of excess of P600,000,

“I am for the House version because the increase in the excise tax on those valued at P600,000 is smaller… this is where the CARS models are. We could live with the Senate version, but that means the increase would be 10 (percent) instead of 6. This means the small cars within the P1 million range would be a little more expensive than in the House version,” Lopez said.

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